Your franchisee has come to you with their financial statements and you can hear in their voice that they’re panicked. “Um, what do I do now? These are not the numbers I had last year and I’m stressing about how I can fix this.”
Here’s the question: How do you avoid having conversations like the one above in your system? How do you support underperforming franchisees?
This week we have Roger Peterson (Franchise Growth Advisor at AC Inc with decades of experience with two of the largest franchises in North America) here to share the answer.
Roger is an expert at turnaround management, so read on to learn what that is, how it works, plus various things you can implement in your franchise system to avoid underperformance altogether!
What is Turnaround Management?
First off, let’s get clear on this term “underperformance” and how this plays into the topic today. When your business is underperforming it means that your financials are not where they should be.
There is (of course) a range of underperformance as a business. All the way from struggling to see profitability to being near insolvency.
Turnaround management is a process of identifying underperforming businesses and taking the steps to turn their financials around. This process works across the range of underperformance when applied to varying degrees of intensity.
The 5 Steps to Turnaround Management
Spotting an underperforming franchisee can come directly from the owner themselves, or may be spotted by a field coach or franchisee support team. When identified by the franchisee, the situation is likely far less dire than when spotted by a field coach.
Once an underperforming location has been identified, these are the 5 steps of turnaround management that a field coach would follow…
- Evaluation & Assessment
- Acute Needs
- Restructuring
- Stability
- Revitalization
The first step is assessing what the actual situation is – this includes reviewing financial documents and business numbers to see where the business falls in relation to profitability or insolvency.
Second, we assess what the business can do right now to solve the problem. Often we use a SWOT analysis for this step. Common challenges right now include things like staffing issues or supply chain struggles.
Next is restructuring the systems needed to make those immediate changes. Mapping out an upgraded staffing model for example.
The stability stage is where the implementation of the systems happens. In our example, this stage would include implementing the new staffing model (making the changes needed to solve the over or understaffing issue).
The last step is revitalization or ensuring that the changes made work within the entire franchise system concept and framework. If the new staffing model doesn’t work with the franchise concept, then there needs to be adjustments made.
How to Avoid These Challenges Altogether
As you can see, turnaround management is a proven process but it’s a lot of work, stress, and lost revenue. The best option is to take the following steps to encourage high performance with your franchisees and avoid this process altogether!
The best way to increase franchisee engagement and profitability? Create an open dialogue with your home office team and your owners. Have regular (quarterly or monthly) business vital check ins where you review KPIs, Profit & Loss Statements, and perform the SWOT analysis.
Having regular check ins and an open dialogue with your owners means that you’ll both be able to spot hurdles before they become larger challenges.
Have more questions about turnaround management? We discuss this and more in our free virtual AC Roundtables where franchisors gather on zoom to collaborate and problem-solve together.
The AC Roundtables are a free resource we offer franchisors who are seeking collaboration and peer-to-peer learning. We’ve been running these virtual roundtables since 2020 and we always love to have new franchisors join us!